That's an insane amount of money. I can't read the article, it would be very interesting to see the rental costs they backed out of and how much they saved.
Meta had another 18 years on its lease and paid the equivalent of about seven years of rent to get out of the obligation, according to BNP Paribas Exane analysts.
It is an insane amount! I initially assumed it was a case of “ha ha, M means a thousand, silly”, but no, the article confirms it’s millions, and equal to seven years of rent.
Like, what? The landlord could fail to find another tenant for seven years and still come out ahead.
There are either draconian anti-subleasing provisions, or office rents have plummeted.
Seems nuts to me, but CEOs also get an interesting pressure not to effectively be in a second sector through real estate holdings, etc, so even if long term subleasing would have paid off they may not have wanted to.
I guess its that having a lot of assets in a lower alpha sector will dilute the upside in a boom compared to a company that is totally leveraged to have all its value operating in the one sector. Fiscal madness.
I get that in theory, but this seems like a special case where they'd want to apply some judgment, especially since it requires a massive commitment of upfront capital that FB could almost certainly deploy more efficiently somewhere else.
Like, maybe I'd understand if the payments were due in a slow trickle over time, but article says that FB has already paid the full amount. This would compare to say, taking a small loss each month on the difference between the rent due and what a leasing manager could net from subleases.
>Like, what? The landlord could fail to find another tenant for seven years and still come out ahead.
Most commercial leases are bespoke, and heavily favor the landlord. Meta being able to pay ONLY 7 years and break the lease speaks to their pricing power in the market place.
Most leases are triple net which means you have to pay for everything (insurance, maintenance, taxes, etc basically as if you owned the building without owning the building) and include no provisions for lease breaks (meaning you're liable for the full amount of the lease, usually all 20 years of it).
That doesn't address why they wouldn't be able to sublease, except for your overgeneral "they're all custom" (sorry, bespoke), which I thought was allowed for such a large lease. In any case, a citation would be helpful to shed light on the issue rather than more assertions.
They leased the majority of a mixed-used building in downtown Austin that would've been 500k sq ft, the largest tenant by far of any company in the city. They quietly backed out of that. ($20M/mo easily) The most expensive part would've been staffing it: $20-60M/mo depending on the type of staff.
